Keyword here is "residents". Those are the Sims actively living in your town and being simulated all the time. The MC screenshot says you have 86 of those which is within what you have set if some of them have pets. The limit doesn't govern role sims, homeless, service sims, dead sims and sims connected through travel. Those shouldn't be slowing your game down as they aren't all being simulated at once.

It's also not going to immediately remove anyone if you set the limit lower but if you have emigration enabled they will be moved out over time or just gradually die off and not be replaced.

I prefer to go by the Demographics Reports, not MC filtered lists, when checking on these things. The Report shows 78 Service Sims and the difference is probably due to stray animals and those in the shelter adoption and horse breeding pools being counted within the 118. I'm also never quite sure where vehicle drivers (taxi, limo, school bus, taxi boat, etc.) show up on these lists. They are sims too and they are on-screen when needed even if we can't usually fully see them, but they aren't playable nor do they add much overhead to the game.

None of this sounds high to me. I mean, I wouldn't want to see 118 or 78 such sims animated and on screen all at the same time as that would probably be a fiasco of a game session. But sims that populate the rosters but are rarely or (as in most cases) never on-screen nor simulated each use up such a tiny amount of resources that it would typically take thousands of unnecessary ones showing up on these reports to have any real performance impact. They are mostly just inert tiny bundles of data standing by in case they are really needed for use some day.
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admiralamott post_id=99450 time=1707413323 user_id=26087 wrote: How do I enable emigration?

Ugh. Be careful what you ask for.

Just kidding, the various kinds of emigration that SP can push are discussed here.